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HomeMy WebLinkAbout1634 Fahnestock In Re: Harry F. Fahnestock, : File Docket: 12-033 Respondent : X-ref: Order No. 1634 : Date Decided: 4/24/14 : Date Mailed: 5/8/14 Before: John J. Bolger, Chair Nicholas A. Colafella, Vice Chair Raquel K. Bergen Mark R. Corrigan Roger Nick Kathryn Streeter Lewis Maria Feeley This is a final adjudication of the State Ethics Commission. Procedurally, the Investigative Division of the State Ethics Commission conducted an investigation regarding possible violation(s) of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq., by the above-named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegations. Upon completion of its investigation, the Investigative Division issued and served upon Respondent a Findings Report identified as an “Investigative Complaint.” An Answer was filed and a hearing was requested. A Stipulation of Findings and a Consent Agreement were subsequently submitted by the parties to the Commission for consideration. The Stipulated Findings are set forth as the Findings in this Order. The Consent Agreement has been approved. I.ALLEGATIONS: That Harry Fahnestock, a public official/public employee in his capacity as a Member of the Newport Borough Water Authority, violated \[Sections 1103(a), 1103(f), 1104(a), 1105(b)(8), and 1105(b)(9)\] of the State Ethics Act (Act 93 of 1998) when a business with which he and/or a member of his immediate family is associated contracted to provide services to the Borough Water Authority in excess of $500 without an open and public process; when he participated in actions of the Authority Board of Directors to authorize contracts with H.F. Fahnestock and approve payments issued to H.F. Fahnestock and Son, a business with which he and \[a\] member of his immediate family are associated; when he failed to file Statements of Financial Interests for the 2009 and 2011 calendar years; \[and\] when he failed to disclose on a Statement of Financial Interests filed for the 2010 calendar year his office, directorship and/or employment and financial interest in H.F. Fahnestock Company. II.FINDINGS: 1. Harry Fahnestock has served as a Newport Borough Water Authority (“NBWA”) Board Member from September 9, 2009, to the present. a. Harry Fahnestock replaced James Welsh, who served as Vice Chairman of the NBWA Board and resigned on June 2, 2009. Fahnestock, 12-033 Page 2 b. Harry Fahnestock has served as Vice Chairman of the NBWA Board from 2010 to the present. 2. The NBWA, in 2009 and 2010, added Fahnestock as a signatory on NBWA accounts and authorized him to execute documents on behalf of the NBWA. a. On October 28, 2009, the NBWA adopted Resolution 09-08, which added Harry Fahnestock as a signatory to all bank accounts owned or managed by the NBWA and the safety deposit box at The Orrstown Bank of Newport. 1. Resolution 09-08 was signed by Barbara Hart, Chairperson, and Harry Fahnestock, Vice Chairman. b. On June 7, 2010, the NBWA adopted a resolution that designated Barbara Hart, Chairperson, and Harry Fahnestock, Vice Chairman, as the officials to execute all documents and agreements between the NBWA and the Commonwealth Financing Authority to facilitate and assist in obtaining an H2O PA grant of $1,278,200 from the Commonwealth Financing Authority to be used for improvements to the water distribution system. 3. The NBWA was formed by Newport Borough, Perry County, pursuant to the provisions of the Municipality Authorities Act of 1945 in 1954. a. A Certificate of Incorporation for the NBWA was filed with the Pennsylvania Department of State on October 6, 1954. 4. The NBWA Board consists of five Members. a. NBWA Board Members are appointed by the Newport Borough Council. b. NBWA Board Members serve terms of four (4) to five (5) years. c. NBWA Board Members receive a stipend of one-hundred dollars ($100.00) per month. d. The current Members of the NBWA Board include Barbara Hart, Chairperson; Harry Fahnestock, Vice Chairman; Jerry Robinson; and Penny Frownfelter. 5. The NBWA employs three full-time employees and two part-time employees. a. The full-time employees include a secretary, Diana McPherson, and two plant operators, Rich Radle and Greg Henry. b. The part-time employees include an operations manager and a weekend operator. 1. Board Member Jerry Robinson serves as the NBWA’s operations manager. 6. The NBWA holds regular Board meetings once every month and special meetings on Wednesdays as needed. a. Board Members are given a copy of the meeting agenda approximately one day in advance of a meeting. Fahnestock, 12-033 Page 3 b. The NBWA meeting agenda includes an agenda, treasurer’s report, and a bill list. 7. The procedure followed by the NBWA when approving bills for payment includes the following: a. The bill list contains an itemized list of all bills submitted to the NBWA for payment. b. The unpaid bill lists are provided to NBWA Board Members prior to NBWA meetings. c. The bill lists or “Checks Written” lists do not itemize the invoices submitted to the NBWA for approval. 1. The lists aggregate the bill amounts into one total amount to be paid to each entity that submitted invoices to the NBWA. 2. The lists do not indicate the dates listed on the invoices submitted to the NBWA. 3. The lists only include the dates of payment to the entities that submitted invoices to the NBWA. 4. The total aggregate amount to be paid to each person or entity is then approved by the NBWA Board Members. d. The entire bill list is approved at one time by a vote of the NBWA Board Members. e. Checks are then approved by the NBWA Board Members for payment of each of the approved bills. f. Two NBWA Board Members’ signatures are required for each check issued by the NBWA for payment of each approved bill. g. The checks are manually signed by two NBWA Board Members, typically Barbara Hart and Jerry Robinson. h. At times, NBWA staff would print the NBWA checks that represented payment on the bills prior to the meeting. 1. In the event the checks were printed prior to the bill list approval by the NBWA Board, the NBWA Board Members were provided with a “Checks Written” list in lieu of an “Unpaid Bill List” prior to the meeting. 2. In the event a “Checks Written” list was used, the NBWA Board Members would vote on the approval of the bills as listed on the “Checks Written” list. 8. Harry Fahnestock owns and operates H.F. Fahnestock & Son, Inc. (“H.F. Fahnestock & Son”). a. H.F. Fahnestock & Son is a contracting/construction business that also specializes in plumbing and electric. Fahnestock, 12-033 Page 4 1. Fahnestock’s son, Scott Fahnestock, assists Fahnestock with H.F. Fahnestock & Son’s operations and works on projects given to H.F. Fahnestock & Son. 2. H.F. Fahnestock & Son does not employ any individuals other than Harry Fahnestock and Scott Fahnestock. th b. H.F. Fahnestock & Son’s business address is 794 South 4 Street, Newport, PA 17074. c. H.F. Fahnestock & Son is not a registered business entity with the Pennsylvania Department of State. d. Harry Fahnestock has owned H.F. Fahnestock & Son since approximately 1963. 9. The equipment owned by the NBWA to perform its operations includes a fork lift, pick-up truck and cars. a. The NBWA does not own the heavy equipment necessary to complete routine maintenance and emergency repairs of waterlines. b. The NBWA has used contractors for such services. 10. The NBWA utilizes the services of outside contractors for specialized equipment, including heavy equipment, as necessary. a. The NBWA would use outside contractors for emergency work and routine maintenance. b. When emergency or maintenance work needs to be performed, the NBWA utilizes a vendor from a list of approved contractors. c. The NBWA recently rebuilt the Borough’s water system, reducing the need for repair work to three to four times each year. 11. In or about February or March 2006, the NBWA began compiling a list of contractors by soliciting interest from contractors which may have been interested in being placed on the NBWA’s emergency work list. a. Letters were sent by the NBWA, listing various requirements that the contractors would be subject to and instructing contractors to reply to the NBWA if interested. 1. The letters requested that the contractors notify the NBWA if interested in being placed on the emergency work list. 12. The letters that were sent during February and March of 2006 stated as follows: Dear Sirs: In an effort to proactively address the needs of our customers and community, the Newport Borough Water Authority is seeking experienced contractors to be on call and available for immediate response in the event of an Authority emergency. Authority emergencies may include, but are not limited to, broken water service mains and water processing plant issues Fahnestock, 12-033 Page 5 requiring the use of specialized equipment. Qualified contractors will be listed on an approved list maintained by the Authority. The Authority requires contractors to be available 24 hours per day, seven days per week, including weekends and holidays. Responsibilities may include, but are not limited to, accessing buried water service mains, removing and/or replacing new or old service lines up to twelve inches in diameter and making repairs to existing service lines. Interested contractors should reply to the Newport Borough Water Authority within 30 days with a copy of this letter together with documentation listed below. The submitted documentation will be reviewed by the full Board at the next regular meeting, which is normally held on the first Monday of every month. If you have questions, you may contact our business office during regular business hours, Monday through Friday (9:00 A.M. – 2:00 P.M. at (717) 567-6373. Please feel free to leave a message if calling after hours. Documentation to be submitted with application:  Demonstrated experience and references  Proof that your company is able to be bonded  Documentation of equipment available to perform work  Proof of minimum $1M liability insurance and workers’ compensation insurance  Equipment and labor rate schedule  Contractor contact and emergency telephone numbers  Evidence of bondability (performance and payments) Any contractors supplying the required documentation and are placed on the Authority’s approved list is not guaranteed that it will receive any of the Authority’s emergency work. The Authority’s non-emergency work will be handled under its normal procurement policies. The Authority looks forward to your reply. Sincerely, Barry W. King Board Secretary 13. The following lists the contractors that responded to the NBWA’s request and the rates charged for labor and equipment pursuant to the documentation submitted to the NBWA by the contractors: a. G&R Charles Excavating: Rates for Labor - “Standard equipment rates and standard labor rates apply under normal working hours. Overtime premium rates of 1 ½ time standard rates apply for non-normal working hours”; Rates for Equipment - “Standard equipment rates and standard labor rates apply under normal working hours. Overtime premium rates of 1 ½ time standard rates apply for non-normal working hours.” Fahnestock, 12-033 Page 6 b. Jay Fulkroad & Sons, Inc.: Rates for Labor – “Laborer: $31.10/hr., Operator: $34.99/hr.”; Rates for Equipment – “Dump truck: $45.00/hr., Backhoe: $45.00/hr., Service trucks: $15.00/hr., D4 Dozier: $35.00/hr.” c. Grosser Excavating, Inc.: Rates for Labor – “Labor: $30.00/hr.”; Rates for Equipment – “Cat 312 Trackhoe: $70.00/hr., Cat 307 Trackhoe: $60.00/hr., John Deere 35D Trackhoe: $60.00/hr. w/ hammer: $85.00/hr., Cat 426 C Backhoe: $60.00/hr., John Deere 332 Skid Loader: $60.00/hr., Road Saw for cutting concrete or asphalt with 30” diameter blade wet-cut: $100.00/hr., Saw for cutting asphalt with 16” diamond blade: $50.00/hr., Tri-axle Dump Truck: $50.00/hr., Single Axle Dump Truck: $50.00/hr.” d. H.F. Fahnestock & Son: Rates for Labor – “Labor - $30.00/hr.”; Rates for Equipment – “Dozer - $95.00/hr., Hoe - $75.00/hr.” e. In addition to the rate information, each contractor provided a list of references, certificates of insurance, documentation indicating that they are bonded, and contact information for representatives of each contractor. 14. In April of 2008, the NBWA sent letters to H.F. Fahnestock & Son, Rick Grosser Excavating, and G&R Charles Excavating, Ltd., asking that they notify the NBWA if they were interested in remaining on the emergency work list. 15. The NBWA letters, dated April 10, 2008, to H.F. Fahnestock & Son, Rick Grosser Excavating, and G&R Charles Excavating, Ltd., requested that they submit a copy of their liability insurance to the NBWA if they were interested in remaining on the emergency repair call list. a. The April 10, 2008, letter states as follows: Dear Contractor: The Newport Borough Water Authority is updating our files. If your company is interested in remaining on our emergency repair call list, we request a copy of your liability insurance. Please forward the document to our office as soon as possible so we can put in in your file. If you have any questions please feel free to call our office at the above number. Thank you in advance for your cooperation regarding this matter. Sincerely, NEWPORT BOROUGH WATER AUTHORITY b. No documentation exists in NBWA files to confirm whether any of the contractors responded to the April 10, 2008, letter. 16. The NBWA did not formally advertise to hire contractors to perform emergency and routine maintenance of waterlines and the water plant. a. The NBWA utilized contractors which included those on the lists developed in 2006 and 2008. b. The list of contractors approved to perform emergency work for the NBWA between 2006 and 2008 included: Fahnestock, 12-033 Page 7 1. G&R Charles Excavating Ltd., Port Treverton, Pennsylvania; 2. Jay Fulkroad & Sons, Inc., McAlisterville, Pennsylvania; 3. Rick Grosser Excavating, Halifax, Pennsylvania; 4. Roger Fleisher, Newport, Pennsylvania; and 5. H.F. Fahnestock & Son, Newport, Pennsylvania. 17. The plant operators and the operations manager, Jerry Robinson, were responsible for selecting which outside contractors would be utilized to perform emergency work. a. The operations manager, Jerry Robinson, would select which contractor to call to perform NBWA work. b. When NBWA work needed to be performed, Jerry Robinson would typically call H.F. Fahnestock & Son to do the work. c. On occasion the plant operators would have to call a contractor to perform NBWA emergency work. d. When the plant operators were directed to call a contractor for emergency work, Jerry Robinson instructed them to call Scott Fahnestock so that H.F. Fahnestock & Son would perform the work. 18. When repairs or emergency projects arose, Robinson would discuss with Fahnestock the nature of the repairs needed. a. Robinson and Fahnestock would discuss the type of equipment needed to complete the repairs. b. After consultation with Fahnestock, Robinson would then make a decision as to which contractor to utilize. 19. The NBWA Board discusses emergency and repair work at regular Board meetings. a. The repairs would be discussed after the work was completed. b. Robinson would advise the Board of the nature of the repairs and the contractor selected to complete the work. 20. Between September 9, 2009, the date Fahnestock was appointed to the NBWA Board, and October 2013, the following contractors were utilized for emergency and/or maintenance \[work\] by the NBWA \[and submitted to the NBWA the indicated\] number of invoices: a. H.F. Fahnestock & Son, twenty-four (24) invoices; Rick Grosser Excavating, three (3) invoices; Jay Fulkroad & Sons, two (2) invoices; Stydinger Bros., one (1) invoice. 21. From 2009, when Fahnestock was appointed to the NBWA Board, to June of 2012, H.F. Fahnestock & Son submitted twenty-three (23) invoices to the NBWA totaling $45,143.14 for work that it performed. Fahnestock, 12-033 Page 8 a. From March 2010 to June 2012, the NBWA issued fourteen (14) checks to H.F. Fahnestock & Son, Inc. in the total amount of $39,143.14, representing payment on those invoices. b. NBWA payment records were not provided for two invoices submitted by H.F. Fahnestock & Son to the NBWA, which represents the difference between the total amount invoiced by H.F. Fahnestock & Son, $45,143.14, and the total amount paid on those invoices by the NBWA, $39,143.14, said difference being $6,000.00. c. Eighteen (18) of the invoices submitted by H.F. Fahnestock & Son were over $500.00. d. No invoices were submitted to the NBWA by H.F. Fahnestock & Son from September 9, 2009, when Fahnestock took office, to March 1, 2010. e. NBWA records confirm that Fahnestock has not invoiced the NBWA nor received any payments since June 2012. f. Fahnestock asserts that at all times relevant hereto all bills submitted by H.F. Fahnestock & Son, Inc. were reasonable and were reasonably related to the work that was performed. 22. Harry Fahnestock, in his official capacity as an NBWA Board Member, regularly participated in the approval of bill lists which included payments to H.F. Fahnestock & Son. 23. NBWA meeting minutes reflect that since September of 2009, Fahnestock participated in NBWA Board actions to approve payment of bill lists which included payments to his company, H.F. Fahnestock & Son, for work performed for the NBWA. a. Payment for completed work was approved in the same manner as other NBWA payments and generally was included as part of monthly bill lists prepared by the NBWA secretary. b. The NBWA Board Members were provided with monthly bill lists for their review prior to their regular monthly meeting. c. The bill lists are voted on in their entirety by a single motion. d. Once the bills are approved, a payment check is issued by the NBWA with the signature of two (2) NBWA Board Members. 24. NBWA meeting minutes detail Fahnestock’s participation in the approval of payment of bill lists which included payments to H.F. Fahnestock & Son from 2009 to 2012, totaling $36,471.98, as follows: a. From March 1, 2010, to June 13, 2012, Fahnestock, as an NBWA Board Member, voted to approve payment to H.F. Fahnestock & Son on thirteen (13) separate occasions. b. On November 1, 2010, H.F. Fahnestock & Son submitted an invoice to the NBWA for work performed and described on the invoice as “Campbell Well 600 ft. HDPE Install” in the amount of $2,671.16. Fahnestock, 12-033 Page 9 1. The NBWA issued check number 8420 to H.F. Fahnestock & Son in the amount of $2,671.16. c. The November 1, 2010, invoice submitted by H.F. Fahnestock & Son was not listed on the November 2, 2010, bill list for approval. d. No information was provided that indicates that the November 2, 2010, bill from H.F. Fahnestock & Son was approved for payment by the NBWA Board. e. Fahnestock asserts that at all times relevant hereto all of the votes that were taken to approve bills from H.F. Fahnestock & Son, Inc. were done at an open, regularly scheduled meeting at which time the solicitor for the NBWA was present. f. Fahnestock purports that at no time during the process, \[when\] Fahnestock made a motion, seconded a motion or participated in a vote, was he advised that he could not do so by the solicitor who was in attendance during the meetings. g. Fahnestock purports that at no time during any process wherein the work was authorized or bills paid at regularly scheduled meetings did the solicitor indicate that Fahnestock was prohibited from participating in the vote, the motion, or second of any motion for the payment of bills. h. Fahnestock purports that had he been advised by the NBWA solicitor that he was not permitted to participate in any approval by way of motion, second, or vote, he would not have done so. 1. Fahnestock purports that at all times relevant, because he was never told that he was not permitted to do so, he continued to vote on bills that were submitted to the NBWA, which bills included services that he and/or his son predecessor \[sic\] company performed on behalf of the NBWA. 25. Harry Fahnestock and Scott Fahnestock owned and held signature authority over account number \[account number redacted\] with Orrstown Bank, with an account title of “Harry F. Fahnestock and Scott A. Fahnestock,” with an address listed on the account of \[address redacted\]. a. The name that appears on the checks associated with this account is “H.F. Fahnestock & Son General Contractor.” th b. The address that appears on the checks is “794 South 4 Street, Newport, PA 17074,” H.F. Fahnestock & Son’s business address. c. Checks issued to H.F. Fahnestock & Son by the NBWA were deposited to this account. 26. Between March 2010 and April 2012, payments from this account were made to Scott Fahnestock, Harry Fahnestock’s son. a. The checks representing the payments to Scott Fahnestock were made payable to either “Cash” or “Scott Fahnestock.” b. All of the aforementioned checks were signed by Scott Fahnestock. Fahnestock, 12-033 Page 10 27. No payments were made to Harry Fahnestock from account number \[account number redacted\] between September 2009 and June 2012. 28. From March 2, 2010, the date on which Harry Fahnestock, as an NBWA Board Member, first approved payment from the NBWA to H.F. Fahnestock & Son, to the present, a total of $80,186.42 was deposited to account number \[account number redacted\]. a. Of those deposited funds, $36,471.98 was from payments made by the NBWA to H.F. Fahnestock & Son, which Harry Fahnestock, as an NBWA Board Member, voted to approve. b. Between March 2010 and April 2012, Scott Fahnestock wrote checks on this account made payable to either “Scott Fahnestock” or “Cash” and signed the checks. 29. On November 6, 2013, Harry F. Fahnestock provided a sworn statement to Commission Investigators, during which he stated as follows: a. He is currently the Vice Chairman of the NBWA Board. 1. NBWA Board Members are compensated one hundred ($100.00) per month. b. In his position as Vice Chairman of the NBWA Board, he runs the Board meetings when the Chairperson, Barbara Hart, is not present. 1. NBWA meetings are held on the first Monday of the month, and a second meeting is held on a Wednesday, if necessary. c. Fahnestock confirmed that he and Robinson, in their positions as NBWA Board Members, would travel to job sites where they were going to perform work, and they would discuss the work that was to be completed at those job sites. 1. These jobs would consist of both repair work and new construction work for the NBWA. 2. Fahnestock and Robinson would discuss how the work was going to be performed. 3. Robinson chose which contractor would be selected to perform the work. d. Fahnestock owned H.F. Fahnestock & Son. 1. H.F. Fahnestock & Son performs excavation work, house construction, barn construction, and bridge construction, and it also performs electrical, plumbing and block laying work. 2. He turned the business over to his son, Scott Fahnestock, when he got on the NBWA Board. 3. After he turned the business over to his son, he still did “little jobs, emergency jobs here for the Water Authority.” Fahnestock, 12-033 Page 11 4. He maintained signature authority over H.F. Fahnestock & Son’s business accounts, and currently maintains sole signature authority over those accounts. 5. H.F. Fahnestock & Son has no employees other than Harry Fahnestock and Scott Fahnestock. e. H.F. Fahnestock & Son performed work for the NBWA in the past. 1. Fahnestock stated that H.F. Fahnestock & Son has not performed any work for the NBWA for the past year and a half. f. H.F. Fahnestock & Son primarily did repair/emergency work but seldom did work awarded by the NBWA pursuant to a bid process. g. Fahnestock outlined the process whereby H.F. Fahnestock & Son would do work for the NBWA. Fahnestock stated: “They would call me and tell me that day. It didn’t make any difference whether it was Saturday or Sunday or anytime and they would say hey we got a water break. We gotta have it fixed and I would come in. It wouldn’t make any difference if it was in the afternoon, we’d take light out and during, during the night because it was an emergency.” h. Robinson would call Fahnestock directly to do the repair/emergency work. i. He is aware of the NBWA approved contractor list for repair/emergency work. 1. Fahnestock stated that he participated in discussions about which contractors would be put on that emergency list. 2. H.F. Fahnestock & Son is a contractor on the emergency call list. j. During NBWA Board meetings when repair/emergency work performed by H.F. Fahnestock & Son was discussed, Robinson, as the NBWA manager, would make comments regarding the work performed by H.F. Fahnestock & Son, and he would say that H.F. Fahnestock & Son “did the job and it was done quick and over with.” k. After H.F. Fahnestock & Son would perform work for the NBWA, Scott Fahnestock would submit an invoice to the NBWA by hand-carrying the invoice to the NBWA office. 1. The NBWA secretary, Diana McPherson, would receive the invoices. l. Fahnestock has signature authority for NBWA checks. 1. Two Board Members’ signatures are required on NBWA checks issued as payment on approved bills. m. He has no reason to dispute the information such as bank records and checks that were issued to H.F. Fahnestock & Son from the NBWA. n. \[T\]he Borough \[sic\] records, meeting minutes, and checks relating to the work that his company did are accurate. Fahnestock, 12-033 Page 12 o. The bill lists and the votes on those bill lists are accurately recorded in the minutes. 30. H.F. Fahnestock & Son, a business with which Harry Fahnestock and his son, Scott Fahnestock, are associated, realized a pecuniary benefit as a result of Harry Fahnestock utilizing his position as an NBWA Board Member to engage in discussions with NBWA Board Member and NBWA operations manager Jerry Robinson regarding work that was to be performed for the NBWA, which H.F. Fahnestock & Son subsequently performed and was compensated by the NBWA for performing the work; and when Harry Fahnestock, as an NBWA Board Member, voted to approve payment from the NBWA to H.F. Fahnestock & Son on thirteen (13) separate occasions. The following findings relate to Fahnestock failing to file Statements of Financial Interests for the 2009 and 2011 calendar years and failing to disclose on a Statement of Financial Interests filed for the 2010 calendar year his office, directorship and/or employment and financial interest in H.F. Fahnestock & Son. 31. As an NBWA Board Member, Fahnestock is required to file Statements of Financial st Interests (“SFIs”) by May 1 annually \[containing information for the prior calendar year\]. 32. SFI filing requirements for public officials and public employees are mandated by Section 1104 of the State Ethics Act. st a. Fahnestock is required to file an SFI by May 1 annually in his position as an NBWA Board Member. 33. On October 31, 2012, the secretary for the NBWA provided all SFIs filed for NBWA officials for calendar years 2008 through 2013 to representatives of the Pennsylvania State Ethics Commission pursuant to a compliance review. 34. NBWA records confirm two SFIs on file with the Authority for Fahnestock. a. One SFI for Harry Fahnestock contains a signature purported to be Harry F. Fahnestock’s with a date of January 11, 2010. b. The second SFI on file for Fahnestock contains a signature purported to be H.F. Fahnestock’s with a date of January 17, 2012. c. Neither form indicates the calendar year for which the form was filed. 35. The SFI with a date of January 11, 2010, contained the following information: a. Name: Harry F. Fahnestock th Address: 794 S. 4 Street, Newport, PA 17074 Status: Nominee Position: Vice Chairman Water Authority Real Estate Interests: None Creditors: None Gifts: None Transportation, lodging, hospitality: None Office, directorship, employment: None Financial interest in any legal entity in business for profit: None Business interest transferred to immediate family member: None Fahnestock, 12-033 Page 13 b. On that form the blocks for governmental entity (#5), year (#7), and direct/indirect sources of income (#10) were not completed. 36. The SFI with a filing date of January 17, 2012, included only Fahnestock’s name, address and public position/public office. a. The following blocks of information were not completed: Block #3 – Status; Block #5 – Governmental Entity; Block #6 – Occupation or Profession; Block #7 – Year; Block #8 – Real Estate Interests; Block #9 – Creditors; Block #11 – Gifts; Block #12 – Transportation, Lodging, Hospitality; Block #13 – Office, Directorship or Employment in any Business; Block #14 – Financial Interests in any Legal Entity in Business for Profit; and Block #15 – Business Interests Transferred to Immediate Family Member. 37. Section 1104(d) of the State Ethics Act mandates that “No public official shall be allowed to take the oath of office or enter or continue upon his duties, nor shall he receive compensation from public funds, unless he has filed a Statement of Financial Interests as required by this chapter.” 38. Fahnestock received compensation as a Member of the NBWA Board in the following amounts at a time when Fahnestock did not have accurate and complete Statements of Financial Interests for calendar years 2009, 2010, and 2011 filed with the NBWA. 2009: $ 400.00 2010: $1,200.00 2011: $1,200.00 2012: $1,200.00 III.DISCUSSION: As a Member of the Board of the Newport Borough Water Authority (“Authority”) from September 9, 2009, to the present, Respondent Harry F. Fahnestock, also referred to hereinafter as “Respondent,” “Respondent Fahnestock,” and “Fahnestock,” has been a public official subject to the provisions of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq. The allegations are that Fahnestock violated Sections 1103(a), 1103(f), 1104(a), 1105(b)(8), and 1105(b)(9) of the Ethics Act: (1) when a business with which he and/or a member of his immediate family is associated contracted to provide services to the Authority in excess of $500 without an open and public process; (2) when he participated in actions of the Authority Board to authorize contracts with H.F. Fahnestock & Son, Inc. and approve payments issued to H.F. Fahnestock & Son, Inc., a business with which he and a member of his immediate family are associated; (3) when he failed to file Statements of Financial Interests (“SFIs”) for the 2009 and 2011 calendar years; and (4) when he failed to disclose on an SFI filed for the 2010 calendar year his office, directorship and/or employment and financial interest in H.F. Fahnestock & Son, Inc. Pursuant to Section 1103(a) of the Ethics Act, a public official/public employee is prohibited from engaging in conduct that constitutes a conflict of interest: § 1103. Restricted activities (a)Conflict of interest.— No public official or public employee shall engage in conduct that constitutes a conflict of interest. Fahnestock, 12-033 Page 14 65 Pa.C.S. § 1103(a). The term "conflict of interest" is defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. 65 Pa.C.S. § 1102. Section 1103(a) of the Ethics Act prohibits a public official/public employee from using the authority of public office/employment or confidential information received by holding such a public position for the private pecuniary benefit of the public official/public employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. Section 1103(f) of the Ethics Act imposes certain restrictions as to contracting: § 1103. Restricted activities (f)Contract.— No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 65 Pa.C.S. § 1103(f). Section 1103(f) of the Ethics Act provides in part that no public official/public employee or his spouse or child or business with which the public official/public employee or his spouse or child is associated may enter into a contract with his governmental body valued at five hundred dollars or more or any subcontract valued at five hundred dollars or Fahnestock, 12-033 Page 15 more with any person who has been awarded a contract with the governmental body with which the public official/public employee is associated unless the contract is awarded through an open and public process including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. Section 1104(a) of the Ethics Act provides that each public official/public employee must file an SFI for the preceding calendar year, each year that he holds the position and the year after he leaves it. Section 1105(b)(8) of the Ethics Act requires the filer to disclose on the SFI any office, directorship or employment in any business entity. Section 1105(b)(9) of the Ethics Act requires the filer to disclose on the SFI any financial interest in any legal entity engaged in business for profit. The term “financial interest” is defined in the Ethics Act as “\[a\]ny financial interest in a legal entity engaged in business for profit which comprises more than 5% of the equity of the business or more than 5% of the assets of the economic interest in indebtedness.” 65 Pa.C.S. § 1102. As noted above, the parties have submitted a Consent Agreement and Stipulation of Findings. The parties' Stipulated Findings are set forth above as the Findings of this Commission. We shall now summarize the relevant facts as contained therein. The Authority Board consists of five Members. Fahnestock has served as a Member of the Authority Board from September 9, 2009, to the present. Fahnestock has served as Vice Chairman of the Authority Board from 2010 to the present. The Authority employs three full-time employees, including a secretary and two plant operators, and two part-time employees, including an operations manager and a weekend operator. Authority Board Member Jerry Robinson (“Robinson”) serves as the Authority operations manager. The Authority holds regular Authority Board meetings once every month and special meetings as needed. Approximately one day in advance of a meeting, Authority Board Members are given a meeting agenda which includes a bill list. The Authority Board votes on the bill list in its entirety by a single motion. Once the bill list is approved, the Authority issues checks which are signed by two Authority Board Members. Fahnestock owns and operates H.F. Fahnestock & Son, Inc. (also referred to herein as “H.F. Fahnestock & Son” and “H.F. Fahnestock”), a contracting/construction business that performs excavation and construction as well as electrical, plumbing, and block laying work. Fahnestock’s son, Scott Fahnestock, assists Fahnestock with the operations of H.F. Fahnestock and works on projects given to H.F. Fahnestock. Fahnestock and his son are the only individuals employed with H.F. Fahnestock. The Authority does not own the heavy equipment necessary to complete emergency or maintenance work and utilizes the services of contractors for such work. Between 2006 and 2008, the Authority compiled a list of contractors (“Contractor List”) approved to perform emergency or maintenance work for the Authority. The Contractor List included H.F. Fahnestock. When emergency or maintenance work needed to be performed, the Authority did not formally advertise to hire a contractor but instead utilized a contractor from the Contractor List. The plant operators and Robinson were responsible for selecting which contractors were to be utilized to perform emergency work. When repairs or emergency projects arose, Robinson discussed with Fahnestock, in his position as an Authority Board Member, the nature of the repairs needed and the type of equipment needed to complete the repairs. After consultation with Fahnestock, Robinson decided which contractor to utilize Fahnestock, 12-033 Page 16 for the work. Robinson typically called H.F. Fahnestock when Authority work needed to be performed. When the plant operators were directed to call a contractor for emergency work, Robinson instructed them to call Scott Fahnestock so that H.F. Fahnestock would perform the work. Robinson advised the Authority Board at an Authority Board meeting of the nature of the repairs and the contractor selected to complete the work. H.F. Fahnestock primarily did repair/emergency work for the Authority but seldom did work awarded by the Authority pursuant to a bid process. Between March 1, 2010, and June 2012, H.F. Fahnestock submitted twenty-three invoices to the Authority for work that it performed for the Authority. Eighteen of the invoices submitted by H.F. Fahnestock were over $500.00. From March 2010 to June 2012, the Authority issued fourteen checks totaling $39,143.14 to H.F. Fahnestock. Fahnestock regularly participated in the Authority Board’s approval of bill lists which included payments to H.F. Fahnestock for work performed for the Authority. From March 1, 2010, to June 13, 2012, Fahnestock voted on thirteen separate occasions to approve bill lists that included payments totaling $36,471.98 to H.F. Fahnestock. The payments that the Authority made to H.F. Fahnestock were deposited into a checking account over which Fahnestock and his son held signature authority. H.F. Fahnestock has not invoiced the Authority nor received any payments from the Authority since June 2012. As an Authority Board Member, Fahnestock is required to annually file an SFI by May 1 disclosing financial information for the prior calendar year. On October 31, 2012, an SFI compliance review confirmed that two SFIs were on file with the Authority for Fahnestock. One SFI was dated January 11, 2010, and the other SFI was dated January 17, 2012. Neither SFI indicated the calendar year for which it was filed. Three blocks were not completed on the SFI dated January 11, 2010, and eleven blocks were not completed on the SFI dated January 17, 2012, as detailed in Fact Findings 35 b and 36 a, respectively. Having highlighted the Stipulated Findings and issues before us, we shall now apply the Ethics Act to determine the proper disposition of this case. The parties' Consent Agreement sets forth a proposed resolution of the allegations as follows: 3. The Investigative Division will recommend the following in relation to the above allegations: a. That a violation of Section 1103(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1103(a) occurred when Fahnestock utilized his position as a Newport Borough Water Authority (NBWA) Board Member to engage in discussions with NBWA Board Member and operations manager, Jerry Robinson, regarding work that was to be performed for the Newport Borough Water Authority, which H.F. Fahnestock & Son subsequently performed and was compensated by the NBWA for performing said work; and when Fahnestock subsequently participated in actions of the Board to approve payments issued to H.F. Fahnestock & Son, a business with which he and a member of his immediate family are associated. Fahnestock, 12-033 Page 17 b. That a violation of Section 1104(a) \[of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1104(a)\] occurred when Fahnestock failed to file Statements of Financial Interests for the 2009 and 2011 calendar years by May 1, 2010 and May 1, 2012, respectively. c. That a violation of Section 1105(b) \[of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1105(b)\] occurred when Fahnestock failed to disclose on a Statement of Financial Interests filed for the 2010 calendar year, his office, directorship and/or employment and financial interest in H.F. Fahnestock \[&\] Son. 4. Fahnestock agrees to make payment in the amount of $2,800.00 in settlement of this matter payable to the Newport Borough Water Authority and forwarded to the Pennsylvania State Ethics Commission within thirty (30) days of the issuance of the final adjudication in this matter. 5. Fahnestock agrees to file complete and accurate Statements of Financial Interests with \[the\] Newport Borough Water Authority through the Pennsylvania State Ethics Commission, for the 2009, 2010, \[and\] 2011 calendar years within thirty (30) days of the issuance of the final adjudication in this matter. 6. Fahnestock agrees to not accept any reimbursement, compensation or other payment from \[the\] Newport Borough Water Authority representing a full or partial reimbursement of the amount paid in settlement of this matter. 7. The Investigative Division will recommend that the State Ethics Commission take no further action in this matter; and make no specific recommendations to any law enforcement or other authority to take action in this matter. Such, however, does not prohibit the Commission from initiating appropriate enforcement actions in the event of Respondent's failure to comply with this agreement or the Commission's order or cooperating with any other authority who may so choose to review this matter further. Consent Agreement, at 1-2. In considering the allegations and the recommendations of the Consent Agreement, it appears that the Investigative Division in the exercise of its prosecutorial discretion has elected to non pros that portion of the allegations pertaining to Section 1103(f) of the Ethics Act. We therefore need not address that particular allegation. We accept the recommendation of the parties for a finding that Fahnestock violated Section 1103(a) of the Ethics Act when he utilized his position as an Authority Board Member to engage in discussions with Authority Board Member and operations manager Robinson regarding work that was to be performed for the Authority, which work H.F. Fahnestock subsequently performed for compensation; and when he subsequently participated in actions of the Authority Board to approve payments issued to H.F. Fahnestock, a business with which he and a member of his immediate family are associated. Fahnestock, 12-033 Page 18 H.F. Fahnestock is a business with which Fahnestock is associated as the owner and with which Fahnestock’s son is associated as an employee. Fahnestock was acting in his public capacity as an Authority Board Member when he discussed with Robinson, who is an Authority Board Member and the Authority operations manager, the Authority’s need to have repairs done and the type of equipment needed to complete the repairs. After consultation with Fahnestock, Robinson decided which contractor to utilize for the Authority work, and he typically called H.F. Fahnestock. When the plant operators were directed to call a contractor for emergency work, Robinson instructed them to call Scott Fahnestock so that H.F. Fahnestock would perform the work. Between March 1, 2010, and June 2012, H.F. Fahnestock submitted twenty-three invoices to the Authority for work that it performed for the Authority. Fahnestock used the authority of his public position as an Authority Board Member when, from March 1, 2010, to June 13, 2012, he voted on thirteen separate occasions to approve bill lists that included payments totaling $36,471.98 to H.F. Fahnestock. Based upon the Stipulated Findings and the Consent Agreement, we hold that Fahnestock violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), when he utilized his position as an Authority Board Member to engage in discussions with Authority Board Member and operations manager Robinson regarding work that was to be performed for the Authority, which H.F. Fahnestock subsequently performed and was compensated by the Authority for performing said work; and when he subsequently participated in actions of the Authority Board to approve payments issued to H.F. Fahnestock, a business with which he and a member of his immediate family are associated. As for the allegations regarding Fahnestock’s SFIs, per the Consent Agreement, it would appear that the parties are treating Fahnestock’s filing of deficient SFIs dated January 11, 2010, and January 17, 2012, as a failure to file SFIs for the 2009 and 2011 calendar years, respectively. In addition, although the Stipulated Findings do not address Fahnestock’s SFI for the 2010 calendar year, per the Consent Agreement, the parties are in agreement that Fahnestock failed to disclose his office, directorship or employment and financial interest in H.F. Fahnestock on an SFI filed for the 2010 calendar year. We hold that a violation of Section 1104(a) of the Ethics Act, 65 Pa.C.S. § 1104(a), occurred when Fahnestock failed to file SFIs for the 2009 and 2011 calendar years by May 1, 2010, and May 1, 2012, respectively. We further hold that a violation of Section 1105(b) of the Ethics Act, 65 Pa.C.S. § 1105(b), occurred when Fahnestock failed to disclose on an SFI filed for the 2010 calendar year his office, directorship and/or employment and financial interest in H.F. Fahnestock. As part of the Consent Agreement, Fahnestock has agreed to make payment in the amount of $2,800.00 payable to the Newport Borough Water Authority and forwarded to this Commission within thirty (30) days of the issuance of the final adjudication in this matter. Fahnestock has also agreed to not accept any reimbursement, compensation or other payment from the Authority representing a full or partial reimbursement of the amount paid in settlement of this matter. Fahnestock has further agreed to file complete and accurate SFIs for calendar years 2009, 2010, and 2011 with the Authority, through this Commission, within thirty days of the issuance of the final adjudication in this matter. We determine that the Consent Agreement submitted by the parties sets forth a proper disposition for this case, based upon our review as reflected in the above analysis and the totality of the facts and circumstances. Accordingly, per the Consent Agreement of the parties, Fahnestock is directed to Fahnestock, 12-033 Page 19 make payment in the amount of $2,800.00 payable to the Newport Borough Water th Authority and forwarded to this Commission by no later than the thirtieth (30) day after the mailing date of this adjudication and Order. Per the Consent Agreement of the parties, Fahnestock is further directed to not accept any reimbursement, compensation or other payment from the Authority representing a full or partial reimbursement of the amount paid in settlement of this matter. To the extent he has not already done so, Fahnestock is directed to file complete and accurate SFIs for calendar years 2009, 2010, and 2011 with the Authority, through this th Commission, by no later than the thirtieth (30) day after the mailing date of this adjudication and Order. Compliance with the foregoing will result in the closing of this case with no further action by this Commission. Noncompliance will result in the institution of an order enforcement action. IV.CONCLUSIONS OF LAW: 1. As a Member of the Board of the Newport Borough Water Authority (“Authority”) from September 9, 2009, to the present, Respondent Harry F. Fahnestock (“Fahnestock”) has been a public official subject to the provisions of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq. 2. Fahnestock violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), when he utilized his position as an Authority Board Member to engage in discussions with Authority Board Member and operations manager Jerry Robinson regarding work that was to be performed for the Authority, which H.F. Fahnestock & Son, Inc. subsequently performed and was compensated by the Authority for performing said work; and when he subsequently participated in actions of the Authority Board to approve payments issued to H.F. Fahnestock & Son, Inc., a business with which he and a member of his immediate family are associated. 3. A violation of Section 1104(a) of the Ethics Act, 65 Pa.C.S. § 1104(a), occurred when Fahnestock failed to file Statements of Financial Interests for the 2009 and 2011 calendar years by May 1, 2010, and May 1, 2012, respectively. 4. A violation of Section 1105(b) of the Ethics Act, 65 Pa.C.S. § 1105(b), occurred when Fahnestock failed to disclose on a Statement of Financial Interests filed for the 2010 calendar year his office, directorship and/or employment and financial interest in H.F. Fahnestock & Son, Inc. In Re: Harry F. Fahnestock, : File Docket: 12-033 Respondent : Date Decided: 4/24/14 : Date Mailed: 5/8/14 ORDER NO. 1634 1. As a Member of the Newport Borough Water Authority (“Authority”) Board, Harry F. Fahnestock (“Fahnestock”) violated Section 1103(a) of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1103(a), when he utilized his position as an Authority Board Member to engage in discussions with Authority Board Member and operations manager Jerry Robinson regarding work that was to be performed for the Authority, which H.F. Fahnestock & Son, Inc. subsequently performed and was compensated by the Authority for performing said work; and when he subsequently participated in actions of the Authority Board to approve payments issued to H.F. Fahnestock & Son, Inc., a business with which he and a member of his immediate family are associated. 2. A violation of Section 1104(a) of the Ethics Act, 65 Pa.C.S. § 1104(a), occurred when Fahnestock failed to file Statements of Financial Interests for the 2009 and 2011 calendar years by May 1, 2010, and May 1, 2012, respectively. 3. A violation of Section 1105(b) of the Ethics Act, 65 Pa.C.S. § 1105(b), occurred when Fahnestock failed to disclose on a Statement of Financial Interests filed for the 2010 calendar year his office, directorship and/or employment and financial interest in H.F. Fahnestock & Son, Inc. 4. Per the Consent Agreement of the parties, Fahnestock is directed to make payment in the amount of $2,800.00 payable to the Newport Borough Water Authority and forwarded to the Pennsylvania State Ethics Commission by no later than the th thirtieth (30) day after the mailing date of this Order. 5. Per the Consent Agreement of the parties, Fahnestock is further directed to not accept any reimbursement, compensation or other payment from the Authority representing a full or partial reimbursement of the amount paid in settlement of this matter. 6. To the extent he has not already done so, Fahnestock is directed to file complete and accurate Statements of Financial Interests for calendar years 2009, 2010, and 2011 with the Authority, through the Pennsylvania State Ethics Commission, by no th later than the thirtieth (30) day after the mailing date of this Order. 7. Compliance with paragraphs 4, 5, and 6 of this Order will result in the closing of this case with no further action by this Commission. a. Non-compliance will result in the institution of an order enforcement action. BY THE COMMISSION, ___________________________ Name, Case # Page 21 John J. Bolger, Chair